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## Can $1.5 Million Support a $10,000 Monthly Retirement Budget?

Determining if a nest egg of $1.5 million at age 60 can sustain a $10,000 monthly retirement budget requires careful financial planning and analysis. As a certified financial planner and managing director at URS Advisory, I utilize specific frameworks to assess whether clients’ savings can realistically support their retirement lifestyle goals. In this article, we'll dissect the case of Karen and Frank Miller, a couple from Florida eager to navigate their financial situation and spend confidently in retirement.

### The Millers' Financial Landscape

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At age 60, Karen and Frank have accumulated a total of $1.5 million in investable assets. This includes a combination of a Roth IRA worth $150,000, a joint brokerage account valued at $420,000, a 401(k) with approximately $886,000, and a high-yield savings account totaling $50,000. Additionally, the couple possesses a paid-off home worth about $850,000.

To maintain their lifestyle, they estimate basic expenses of $8,300 per month, with an additional $1,700 for travel in the first 15 years of retirement, culminating in a total monthly spending goal of $10,000. Despite their substantial savings, they face confusion and anxiety about whether this amount will support their desired monthly expenditures and whether they can allow themselves to enjoy their money.

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### Analyzing Risk Tolerance and Portfolio Strategy

Without professional guidance, the Millers turned to online calculators that produced conflicting outcomes. To bring clarity to their situation, we begin with a comprehensive analysis of their investment portfolio and risk tolerance.

Using the risk assessment software, Riskalyze, we categorized their investments based on risk levels – from conservative cash accounts to volatile stock investments. The Millers rated as balanced investors, scoring 55 out of 100 on the risk scale, indicating their preference for moderate-risk investments. However, their current portfolio score of 66 revealed a higher risk exposure than they intended, primarily due to a stock allocation of 65%.

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In light of a potential market downturn, which could result in significant losses for their portfolio, I guided them to restructure their investments. By reallocating their assets into three distinct buckets— a fixed asset bucket for short-term needs, a balanced bucket for mid-range needs, and a high-risk, high-reward stock bucket for long-term growth— we aimed to optimize their returns and mitigate risk. This restructuring reduced their overall stock allocation to 46% while increasing average returns to approximately 7.14%.

### Calculating Social Security Benefits

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With their investment portfolio optimized, we shifted our focus to maximizing their Social Security benefits, a crucial pillar in their retirement income strategy. Both Karen and Frank planned to file for Social Security at age 62, but optimal filing strategies revealed that delaying benefits could yield significantly higher monthly payments.

Through detailed analysis, we found that by filing later — at ages 66 and 69 respectively — Frank and Karen could receive monthly benefits of about $3,747 for Frank and $2,120 for Karen, compared to the lower amounts they would receive by filing earlier. This adjustment alone could help improve their monthly spending capacity.

### Budget Adjustments and Housing Considerations

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Next, we evaluated their overall spending capacity based on their revised financial profile. Unfortunately, even with the optimized investment strategy and delayed Social Security benefits, the Millers could only safely spend about $7,376 per month— still $2,624 short of their $10,000 goal.

To help bridge this gap, we explored alternative options, such as downsizing their home. The Millers owned a sizable home that they no longer required. By selling their home and moving to a smaller property valued at $550,000, they could free up $300,000 for investment, which would increase their monthly spending potential significantly.

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Additionally, we suggested adjusting their travel budget. Instead of allocating for travel spending over 15 years, if they concentrated this expense into a five-year window, they could further enhance their monthly budgeting capabilities.

### Conclusion: A Balanced Approach to Retirement Spending

By combining investment optimization, strategic downsizing, Social Security maximization, and guided spending adjustments, Karen and Frank Miller moved closer to achieving their $10,000 monthly spending target. While they still fell short of this goal, they unlocked greater financial flexibility and peace of mind for their retirement years.

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Retirement planning is not just about having a substantial portfolio; it’s about making informed and strategic decisions to align your financial resources with your lifestyle goals. For anyone facing similar challenges, understanding the nuances of financial planning and the importance of professional guidance can pave the way for a more fulfilling retirement.

For those looking to delve deeper into retirement planning strategies, including tax or distribution planning, a comprehensive follow-up video is available. This resource aims to answer all your questions about optimizing your retirement plans effectively.